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Hedley v. Abhe & Svoboda, Inc.

United States District Court, D. Maryland

July 31, 2015

JOSEPH HEDLEY, et al., Plaintiffs,
v.
ABHE & SVOBODA, INC., Defendant.

MEMORANDUM OPINION

RICHARD D. BENNETT, District Judge.

Plaintiffs Joseph M. Hedley and Fred A. Rauch, III ("Plaintiffs"), [1] bring this False Claims Act[2] action against Defendant ABHE & Svoboda, Inc. ("Defendant" or "ASI") alleging that ASI orchestrated a fraudulent scheme whereby it falsely represented the use of a Disadvantaged Business Enterprise ("DBE") subcontractor in order to receive payments under a government contract. As relators, Plaintiffs initially filed this action in the United States District Court for the Southern District of Illinois. See Compl., ECF No. 2. After the United States elected to intervene (ECF No. 18), it filed the First Amended Complaint (ECF No. 19), alleging violations of the False Claims Act, 31 U.S.C. §§ 3729, et seq., and various state law claims. ASI subsequently moved to dismiss the First Amended Complaint, or in the alternative, transfer the case to the United States District Court for the District of Maryland, pursuant to 28 U.S.C. § 1404(a). See Mot. to Dismiss, ECF No. 33; Mem. in Supp. of Mot. to Dismiss, ECF No. 34. While ASI's motion was pending, the United States moved to withdraw its intervention, and the district court granted the withdrawal. See Mot. to Withdraw Intervention, ECF No. 50; Order, ECF No. 52. Plaintiffs chose to continue to pursue the subject action after the Government's withdrawal. The district court held a hearing on ASI's Motion to Dismiss on July 7, 2014 (ECF No. 62). That court dismissed with prejudice the unjust enrichment claim (Count VI), and transferred the action to this Court pursuant to 28 U.S.C. § 1404(a). See Minute Entry, ECF No. 62; Order, ECF No. 63.

Currently pending is Defendant ASI's Renewed Motion to Dismiss (ECF No. 76). The parties' submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2014). For the reasons that follow, Defendant ASI's Motion to Dismiss (ECF No. 76) is GRANTED and this case shall be DISMISSED WITHOUT PREJUDICE as to Counts I-III and WITH PREJUDICE as to Counts IV, V, and VII.

BACKGROUND

This Court accepts as true the facts alleged in the plaintiffs' complaint. See Aziz v. Alcolac, Inc., 658 F.3d 388, 390 (4th Cir. 2011). The present action arises from a contract between Defendant ASI and the Maryland State Highway Administration ("MSHA") for the cleaning and repainting of the Severn River Bridge[3] (the "Contract"). First Amend. Compl. ¶¶ 17-18. Plaintiffs Joseph Hedley and Fred Rauch were, at all times relevant to this action, officers of Brighton Painting Company ("Brighton"), a participant in the alleged scheme. On April 25, 2006, MSHA invited the submission of bids to clean and repaint the Severn River Bridge. Id. ¶ 18. ASI then submitted a bid proposal to MSHA stating that it intended to achieve MSHA's required fifteen percent DBE[4] participation goal by employing Northeast Work and Safety Boats, LLC ("NWSB"), a certified Women-Owned Business Enterprise ("WBE"), as a subcontractor. Id. ¶¶ 19, 22. On the basis of ASI's representation in its proposal, MSHA awarded the Contract to ASI on July 21, 2006. Id. ¶ 20.

The Contract, pursuant to the DBE participation goal, required ASI to utilize at least fifteen percent of the federal government dollars on goods and services performed by a DBE. Id. ¶ 21. Instead of complying with this DBE participation requirement, ASI allegedly represented that NWSB performed certain work that was actually performed by Brighton. Id. ¶¶ 22-23. Id. ¶ 7. They claim that, under the alleged scheme, ASI paid NWSB eight percent of the government funds ASI received under the Contract, even though NWSB did not perform any "commercially useful function" as mandated by the DBE participation goal. Id. ¶ 25.

In furtherance of the scheme, ASI allegedly submitted false employee payrolls of fictitious NWSB employees, detailing the compensation and benefits provided to NWSB employees under the Contract. Id. ¶ 26. These fictitious NWSB employees were, in reality, employees of Brighton. Id. ASI represented that NWSB certified the false employee records each week. Id. ¶ 27. ASI also allegedly negotiated for the purchase of materials and supplies that named NWSB as the party to be invoiced, when ASI actually paid for the goods. Id. ¶ 28. Finally, Plaintiffs claim that ASI knowingly submitted false quarterly DBE participation reports to MSHA, describing the DBE-related funds going to NWSB for multiple periods, as well as Contractor's Progress Estimates to MSHA, enabling ASI to receive progress payments under the Contract while perpetuating the fraudulent scheme. Id. ¶¶ 30-31. ASI completed its cleaning and repainting of the Severn River Bridge on July 17, 2008.[5] Def.'s Mot. to Dismiss Ex. B, ECF No. 77-2.

In the subject action, Plaintiffs assert six claims against ASI. Counts I-III arise under the False Claims Act, 31 U.S.C. §§ 3729(a)(1)-(3).[6] Counts IV-VII assert common law claims of fraud, breach of contract, unjust enrichment, [7] and payment by mistake, respectively. ASI moves to dismiss all counts pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

STANDARDS OF REVIEW

A. Rule 12(b)(6) of the Federal Rules of Civil Procedure

Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P 8(a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The purpose of Rule 12(b)(6) is "to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).

The Supreme Court's recent opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), "require that complaints in civil actions be alleged with greater specificity than previously was required." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). In Twombly, the Supreme Court articulated "[t]wo working principles" that courts must employ when ruling on Rule 12(b)(6) motions to dismiss. Iqbal, 556 U.S. at 678. First, while a court must accept as true all the factual allegations contained in the complaint, legal conclusions drawn from those facts are not afforded such deference. Id. (stating that "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to plead a claim); see also Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012) ("Although we are constrained to take the facts in the light most favorable to the plaintiff, we need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments." (internal quotation marks omitted)).

Second, a complaint must be dismissed if it does not allege "a plausible claim for relief." Iqbal, 556 U.S. at 679. Although a "plaintiff need not plead the evidentiary standard for proving" her claim, she may no longer rely on the mere possibility that she could later establish her claim. McCleary-Evans v. Maryland Department of Transportation, State Highway Administration, 780 F.3d 582, 586 (4th Cir. 2015) (emphasis omitted) (discussing Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) in light of Twombly and Iqbal ). Under the plausibility standard, a ...


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